As the cosmetics industry took the brunt of a couple of major greenwashing lawsuits in the US in late 2021, the fashion industry, which is now the target of regulatory oversight action in the UK, will start in 2022. As the Securities and Exchange Commission (“SEC”) in the United States begins 2022 with the clear aim of investigating and taking legal action against companies it believes may be engaging in greenwashing, the UK Competition Authority and Markets (“CMA”) announced on Jan. 14 that it is setting its executive action directly overseeing environmental marketing claims in the fashion industry, making greenwashing within the fashion sphere the ultimate corporate focus area.
Now more than ever, globally based companies of all types that prepare and then advertise and market environmental, social and governance (“ESG”) statements and / or disclose information as required by regulatory agencies need to exercise extreme caution. the language used in each of these types of documents (be it formal regulatory documents or glossy, consumer-facing ESG campaigns), or run the risk of enforcement or legal action.
Greenwashing and fashion
The CMA has indicated that it will investigate marketing claims from the fashion industry relating to the environmental friendliness of clothing and footwear, including claims, for example, that clothing items are “environmentally friendly” or “sustainable”. The CMA’s actions follow the September 2021 release of its code for green claims, which aims to educate companies on how to communicate their green initiatives without misleading consumers. The publication of the guide focused on sustainability by the CMA follows the growing interest of consumers in environmental sustainability issues related to clothing. (A couple of months later, in November 2021, the CMA revealed it was preparing to crack down on greenwashing, saying it would investigate “descriptions and labels” used by companies in a “wide range of industries” to promote products and services. claiming to be “environmentally friendly” and whether such labels “could mislead consumers” and violate the law in the process.)
Should the CMA find that fashion companies violate national consumer protection laws, the regulator can take legal action or take the equivalent of an injunction to force companies to change their practices, the which could have significant implications for companies, including from a PR perspective.
Business preparation is essential
2022 is nearly two months old, and already both the SEC and the CMA have shown significant interest in pursuing companies they believe are engaging in practices that amount to greenwashing. Although the cosmetics industry has so far found itself a target in the US and the fashion industry in the UK, it is likely that both sectors will soon become targets of investigation and application in both countries and beyond. As such, 2022 is likely to see a great degree of regulatory enforcement action that will try to curb overzealous marketing language or the claims it sees as greenwashing.
There are numerous avenues companies need to look into to ensure ESG principles are adhered to and accurately conveyed to the public, but an underlying compliance program to minimize the risks of greenwashing allegations is absolutely critical for all actors making related statements. to ESGs. These compliance checks shouldn’t simply be one-time pre-issuance programs; rather, they should be continuous and constant to ensure that, with ever-changing business practices, a focused interest of regulatory agencies on ESG, and a growing attention from the legal world on greenwashing claims, all statements made are truly “compatible with ESGs “and not misleading in any way.
Giovanni Gardella he is a Shareholder and Chief Services Officer of CMBG3 Law. He is licensed to practice in Massachusetts and Tennessee.